2015 interim financial statements

Transcription

MD Family of Funds
2015 INTERIM
FINANCIAL STATEMENTS
A Message Regarding Your Financial Statements
Dear MD Family of Funds Investor:
As part of our commitment to keeping you informed about your MD Fund investments, please find attached the
2015 interim financial statements.
The interim financial statements are produced on a fund-by-fund basis, and your report only includes information
on the funds you owned as of June 30, 2015.
If you have any questions regarding these documents, please contact your MD advisor or the MD TradeCentre at
1 800 267-2332. We thank you for your continued investment in the MD Family of Funds.
Interim Unaudited Financial Statements for the Six-Month Period Ended June 30, 2015
These Interim Unaudited Financial Statements do not contain the Interim Management Report of Fund Performance (“MRFP”)
of the investment fund. If you have not received a copy of the Interim MRFP with this report, you may obtain a copy of
the Interim MRFP at your request, and at no cost, by calling the toll-free number 1 800 267-2332, by writing to us at
MD Financial Management Inc., 1870 Alta Vista Drive, Ottawa ON K1G 6R7, by visiting our website at md.cma.ca or by visiting
the SEDAR website at sedar.com. Copies of the Annual Financial Statements or Annual MRFP may also be obtained, at no cost,
using any of the methods outlined above. Securityholders may also contact us using one of these methods to request a copy of
the investment fund’s proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure.
NOTICE OF NO AUDITOR REVIEW OF THE INTERIM FINANCIAL STATEMENTS
MD Financial Management Inc, the Manager of the Fund, appoints independent auditors to audit the Fund’s Annual Financial
Statements. Under Canadian securities laws (National Instrument 81-106), if an auditor has not reviewed the Interim Financial
Statements, this must be disclosed in an accompanying notice. The Fund’s independent auditors have not performeda review
of these Interim Financial Statements in accordance with standards established by the Canadian Institute of
Chartered Accountants.
MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling
services through the MD Group of Companies. For a detailed list of these companies, visit md.cma.ca.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.
The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future
values of the mutual fund or returns on investment in the mutual fund. Standard performance data assumes reinvestment
of distributions only and does not take into account sales, redemption, distribution or optional charges payable by any
securityholder which would have reduced returns. Mutual funds are not g
uaranteed, their values change frequently and past
performance may not be repeated. Please read the prospectus before investing. You may obtain a copy of the prospectus
before investing by calling your MD Advisor or the MD Trade Centreat 1 800 267-2332.
MD International Value Fund
Schedule of Investment Portfolio as at June 30, 2015 (unaudited)
(in $000’s except for number of shares)
Number
of Shares
Average
Cost
($)
Fair
Value
($)
Number
of Shares
DOMESTIC EQUITIES
Telecommunication Services (0.23%)
Rogers Communications Inc. Cl. B
Total for Telecommunication Services
Total for Domestic Equities (0.23%)
14,803
615
615
615
656
656
656
20,883
23,775
10,200
16,697
38,700
42,691
26,400
23,900
63,911
29,700
48,700
7,900
5,160
21,416
82,200
9,800
51,000
8,999
10,635
26,100
126,673
139,854
2,200
14,100
70,600
15,100
81,900
302
742
104
1,033
122
236
140
104
241
118
179
91
291
238
218
94
126
274
211
121
385
1,790
126
160
101
31
133
7,711
312
736
125
848
4
59
93
154
224
136
89
114
404
249
87
62
60
288
217
126
385
1,837
114
89
66
21
80
6,979
Austria (1.66%)
Conwert Immobilien Invest SE
Erste Group Bank AG
OMV AG
Schoeller-Bleckmann Oilfield Equipment AG
Vienna Insurance Group
Voestalpine AG
Total for Austria
47,336
31,942
4,600
13,216
2,200
29,022
692
1,011
168
1,243
113
1,420
4,647
749
1,132
158
997
94
1,508
4,638
Belgium (0.35%)
Ageas
bpost SA
Delhaize Group
Total for Belgium
10,652
6,100
2,600
468
171
182
821
512
209
268
989
Bermuda (1.57%)
Digital China Holdings Limited
Everest Re Group, Ltd.
First Pacific Company Limited
Kerry Properties Limited
Luk Fook Holdings (International) Limited
Orient Overseas International Ltd.
Shenzhen International Holdings Limited
Yue Yuen Industrial (Holdings) Limited
Total for Bermuda
FOREIGN EQUITIES
Australia (2.49%)
AGL Energy Limited
Australia and New Zealand Banking Group Limited
Bank of Queensland Ltd.
BHP Billiton Limited ADR
Boart Longyear Limited
Bradken Limited
Cabcharge Australia Ltd.
Challenger Financial Services Group Limited
CSR Limited
Downer EDI Limited
Fortescue Metals Group Limited
Lend Lease Corp.
Macquarie Group Limited
McMillan Shakespeare Limited
Metcash Limited
Mineral Resources Limited
Myer Holdings Ltd.
National Australia Bank Limited
Orica Limited
Primary Health Care Ltd.
Qantas Airways Limited
QBE Insurance Group Limited
Rio Tinto Limited
Seven Network Limited
Southern Cross Media Group Limited
Transfield Services Limited
West Australian Newspapers Holdings Ltd.
Total for Australia
Average
Cost
($)
Fair
Value
($)
33,000
10,672
23,000
61,500
30,000
198,679
58,500
22,000
40
2,008
24
267
97
1,200
93
61
3,790
55
2,423
24
301
110
1,272
127
92
4,404
61,857
74,000
99,800
770
819
960
2,549
707
720
789
2,216
6,000
646,000
15,000
309,000
407,000
242,000
68
478
317
208
314
232
1,617
62
447
276
206
323
219
1,533
274,700
598,900
1,067,400
32,650
272,200
1,124
1,342
905
1,100
1,065
5,536
1,203
1,187
1,056
1,161
1,137
5,744
Colombia (0.29%)
Bancolombia SA Preferred ADR
Total for Colombia
14,975
876
876
803
803
Czech Republic (0.30%)
Komercni Banka AS
Total for Czech Republic
3,098
768
768
852
852
Denmark (0.19%)
A.P. Moller – Maersk A/S Series B
Danske Bank A/S
Total for Denmark
99
8,779
183
308
491
224
322
546
4,300
23,146
94
467
561
137
511
648
3,000
18,256
101
245
106
245
Brazil (0.79%)
Banco Bradesco SA ADR
Banco do Brasil SA
Qualicorp SA
Total for Brazil
Cayman Islands (0.55%)
Cheung Kong Property Holdings., Ltd.
China Resources Cement Holdings Limited
CK Hutchison Holdings Limited
Jintian Pharmaceutical Group Limited
Lee & Man Paper Manufacturing Limited
The United Laboratories International Holdings Limited
Total for Cayman Islands
China (2.05%)
Anhui Conch Cement Company Limited Cl. H
China Oilfield Services Limited Cl. H
Industrial and Commercial Bank of China Cl. H
Mindray Medical International Limited ADR Cl. A
Weichai Power Co., Ltd. Cl. H
Total for China
Finland (0.23%)
Nestle Oil OYJ
UPM-Kymmene Corporation
Total for Finland
France (6.15%)
Alstom
Altran Technologies SA
Percentages shown in brackets relate investments at fair value to net assets of the Fund.
The accompanying notes are an integral part of these financial statements.
1
MD Family of Funds | Interim Financial Statements 2015
Number
of Shares
Arkema
AXA SA
BNP Paribas SA
Cie Generale des Etablissements Michelin
CNP Assurances
Compagnie de Saint-Gobain
Credit Agricole SA
Electricite de France
France Telecom SA
Ipsos
Neopost SA
Renault SA
Sanofi
Societe Generale
Sodexo SA
Technicolor SA
Thales SA
Total SA
Valeo SA
Total for France
Average
Cost
($)
Fair
Value
($)
800
18,827
5,052
2,765
9,375
46,743
14,100
9,300
8,600
11,620
1,200
3,278
41,380
29,271
9,071
18,000
5,500
41,896
800
50
520
328
328
201
2,510
276
301
141
377
105
350
4,982
1,651
1,082
134
283
2,661
38
16,664
72
593
381
362
195
2,619
262
259
165
375
64
426
5,080
1,706
1,075
146
414
2,540
157
17,242
Germany (6.39%)
Allianz SE
Aurubis AG
BASF SE
Bayerische Motoren Werke (BMW) AG
Daimler AG
Deutsche Bank AG
Deutsche Telekom AG
Freenet AG NPV
K+S AG
Leoni AG
Merck KGaA
Muenchener Rueckversicherungs-Gesellschaft AG
Pheinmetall AG
Rhoen-Klinikum AG
RWE AG
SAP AG
Siemens AG
Software AG
Stada Arzneimittel AG
Talanx Aktiengesellschaft
Volkswagen AG
Wincor Nixdorf AG
Total for Germany
2,996
3,073
3,942
3,829
20,514
10,500
152,757
4,600
9,681
3,626
1,100
1,976
2,872
8,990
103,600
35,968
7,019
6,633
3,600
5,727
2,262
1,200
598
230
416
504
1,962
420
2,805
59
392
254
107
404
164
302
3,224
3,151
939
234
172
220
543
62
17,162
582
225
432
523
2,330
394
3,284
193
509
286
137
437
182
301
2,780
3,133
882
227
152
219
653
59
17,920
Hong Kong (1.08%)
China Mobile Limited
China Shinewa Pharmaceutical Group Limited
Dah Sing Financial Group
Skyworth Digital Holdings Limited
Television Broadcasts Limited
Wheelock and Company Limited
Total for Hong Kong
120,000
51,000
33,200
186,000
31,800
46,000
1,716
66
235
110
232
279
2,638
1,920
95
270
207
235
294
3,021
Number
of Shares
India (1.29%)
ICICI Bank Limited ADR
Yes Bank Ltd.
Total for India
1,564
1,410
2,974
1,788
1,824
3,612
1,016,400
668
668
625
625
Ireland (1.39%)
C&C Group PLC
Dragon Oil PLC
Icon Public Limited Company
Smurfit Kappa Group PLC
Total for Ireland
46,272
8,000
39,590
6,300
234
64
2,654
117
3,069
226
115
3,324
217
3,882
Israel (1.35%)
Bank Hapoalim Ltd.
Teva Pharmaceutical Industries Ltd.
Teva Pharmaceutical Industries Ltd. ADR
Total for Israel
32,833
6,510
41,800
213
398
2,609
3,220
221
480
3,082
3,783
25,068
4,069
46,500
139,979
11,600
47,273
242
89
248
3,314
104
296
4,293
290
110
263
3,101
154
300
4,218
13,400
2,800
4,200
2,200
44,000
7,000
21,000
25,000
79,600
59,000
27,000
115,000
42,300
3,700
13,900
5,800
19,400
7,700
151,000
95,800
14,800
18,500
187
103
70
61
148
140
186
236
3,116
313
456
392
2,248
46
235
106
313
266
1,171
3,730
231
268
233
149
82
111
208
149
216
222
3,238
309
481
360
2,634
81
305
144
300
271
1,245
3,877
243
306
Italy (1.50%)
Astaldi SPA
Banca IFIS SPA
Enel SPA
Eni SPA
Societa Iniziative Autostradali e Servizi SPA (SIAS)
Unipol Gruppo Finanziario Spa
Total for Italy
Japan (15.75%)
ADEKA CORPORATION
Aisin Seiki Co., Ltd.
Alfresa Holdings Corporation
Aoyama Trading Co., Ltd.
Aozora Bank, Ltd.
Asahi Holdings, Inc.
Asahi Kasei Corporation
Calsonic Kansei Corporation
Canon Inc.
Central Glass Co. Ltd.
Daihatsu Motor Co., Ltd.
Dainippon Ink & Chemicals Inc.
Denso Corp.
DOUTOR NICHIRES Holdings Co., Ltd
FUJI OIL CO., LTD.
Heiwa Corporation
Hino Motors Limited
Hitachi High-Technologies Corporation
Hitachi, Ltd.
Honda Motor Co., Ltd.
Isuzu Motors Limited
Itochu Corporation
2
Fair
Value
($)
137,577
110,184
Indonesia (0.22%)
PT Indofood Sukses Makmur Tbk
Total for Indonesia
Average
Cost
($)
Number
of Shares
Japan Airlines Co., Ltd.
JFE Holding, Inc.
J-OIL MILLS, INC.
Kaneka Corporation
KANEMATSU CORPORATION
Kao Corporation
KDDI Corporation
Kobe Steel Ltd.
Konica Minolta Holdings, Inc.
KYOWA EXEO CORPORATION
Kyudenko Corporation
Matsumotokiyoshi Holdings Co., Ltd. NPV
Medipal Holdings Corporation
Megmilk Snow Brand Co., Ltd.
Mitsubishi Corporation
Mitsubishi Gas & Chemical Company, Limited
Mitsubishi UFJ Financial Group, Inc.
Mitsui & Co.
Mitsui Mining & Smelting Company, Limited
Mizuho Financial Group, Inc.
Mochida Pharmaceutical Co., Ltd.
Morinaga Milk Industry Co. Ltd.
NEC Corporation
Nichias Corp.
Nichi-Iko Pharmaceutical Co., Ltd.
Nippon Flour Mills Co., Ltd.
Nippon Steel Corporation
Nippon Telegraph and Telephone Corporation
Nissan Motor Co., Ltd.
Nissin Electric Co., Ltd.
NTT DoCoMo, Inc.
OILES CORPORATION
Otsuka Holdings KK
Paramount Bed Holdings Company Ltd.
Prima Meat Packers, Ltd.
Resona Holdings, Inc.
Ricoh Co., Ltd.
Sawai Pharmaceutical Co., Ltd.
Secom Co., Ltd.
Seiko Epson Corporation
Seino Transportation Company Ltd.
Seven & I Holdings Co. Ltd.
Ship Healthcare Holdings, Inc.
Sojitz Holdings Corporation
Sumitomo Corp.
Sumitomo Electric Industries, Ltd.
Sumitomo Mitsui Financial Group Inc.
Sumitomo Rubber Industries Ltd.
Takeda Pharmaceutical Company Limited
The Yokohama Rubber Co. Ltd.
Toagosei Co. Ltd.
Toho Pharmaceutical Co., Ltd
Tokai Rika Co. Ltd.
Tokai Rubber Industries, Ltd.
Tokio Marine Holdings, Inc.
10,900
13,400
37,000
29,000
107,000
29,900
6,000
107,000
28,800
10,200
12,000
3,800
6,400
6,700
5,100
48,000
54,700
11,400
66,000
273,800
1,800
23,000
102,000
42,000
4,400
17,000
339,000
17,600
40,500
31,800
83,700
4,200
3,000
2,600
64,000
71,900
27,000
3,200
23,600
17,500
7,000
23,400
9,600
110,600
12,700
19,600
8,200
10,400
56,900
12,500
9,500
7,800
5,600
11,700
64,600
Average
Cost
($)
395
381
122
203
228
1,467
123
228
439
113
242
106
89
136
109
343
377
179
222
616
138
104
391
293
79
83
1,050
609
453
230
1,733
66
90
90
244
442
319
225
1,669
386
56
1,034
240
319
175
388
352
177
3,172
269
90
160
133
142
2,761
Fair
Value
($)
Number
of Shares
475
372
159
265
234
1,739
181
225
420
149
270
219
131
107
140
336
492
194
223
741
127
106
387
326
149
129
1,099
797
528
282
2,004
100
120
96
245
491
350
233
1,916
388
98
1,257
248
336
185
380
457
202
3,436
314
99
225
175
117
3,362
Toyo Ink SC Holdings Co. Ltd.
Toyoda Gosei Co., Ltd.
Tsumura & Co.
Unipres Corporation
Valor Co., Ltd.
Total for Japan
Average
Cost
($)
Fair
Value
($)
27,000
7,700
8,800
11,600
8,000
145
212
238
280
235
39,412
135
232
237
304
251
44,159
Jersey (1.18%)
Shire PLC
Total for Jersey
33,064
2,868
2,868
3,305
3,305
Luxembourg (0.29%)
Subsea 7 SA
Total for Luxembourg
67,859
1,025
1,025
826
826
Netherlands (2.47%)
AEGON NV
Corbion NV
Core Laboratories NV
ING Groep NV
Koninklijke Ahold NV
PostNL NV
TKH Group NV
Total for Netherlands
30,496
15,618
14,932
7,300
148,161
19,700
7,683
253
403
2,098
92
2,960
94
404
6,304
280
385
2,124
150
3,464
109
402
6,914
New Zealand (0.14%)
Chorus Limited
Sky Network Television Ltd.
Total for New Zealand
83,514
36,491
175
203
378
205
185
390
Norway (2.08%)
DNB Holding ASA
Fred. Olsen Energy ASA
Marine Harvest
Norsk Hydro ASA
Salmar ASA
Statoil ASA
Statoil ASA ADR
Yara International ASA
Total for Norway
125,880
2,200
7,400
179,769
14,955
9,518
47,596
8,798
2,415
72
113
1,026
280
252
1,215
510
5,883
2,612
19
106
943
273
212
1,063
570
5,798
Singapore (2.55%)
DBS Group Holdings Limited
Singapore Telecommunications Limited
United Overseas Bank Ltd.
Wilmar International Ltd.
Total for Singapore
96,200
628,700
114,419
129,200
1,641
1,632
2,260
390
5,923
1,844
2,463
2,444
392
7,143
4,341
3,172
673
1,070
948
908
2,926
1,029
795
954
2,778
South Korea (0.99%)
Hyundai Mobis
POSCO
Samsung Electronics Co., Ltd.
Total for South Korea
3
Number
of Shares
Average
Cost
($)
Fair
Value
($)
Spain (4.35%)
Amadeus IT Holding SA Series A
Banco Santander SA
Ebro Puleva SA
Ence Energia y Celulosa, SA
Iberdrola SA
Mapfre SA
Repsol, SA
Repsol, SA, Rights (Exp. 07/03/15)
Telefonica SA
Total for Spain
43,602
235,839
9,665
57,133
455,926
79,700
13,613
6,700
169,691
1,873
2,127
237
263
3,603
319
331
0
2,998
11,751
2,169
2,055
234
244
3,833
342
298
5
3,010
12,190
Sweden (2.36%)
AB SKF Series B
Boliden AB
Getinge AB
Nordea Bank AB
Skandinaviska Enskilda Banken Series A
Swedbank AB Series A
Telefonaktiebolaget LM Ericsson Cl. B
Teliasonera AB
Total for Sweden
12,963
11,267
53,532
38,460
37,153
4,700
16,100
389,982
383
217
1,552
592
551
97
233
2,957
6,582
369
256
1,606
598
592
136
208
2,863
6,628
Switzerland (9.83%)
ABB Ltd.
Autoneum Holding AG
Baloise Holding Ltd.
Bucher Industries AG
Cembra Money Bank AG
Clariant AG
Credit Suisse Group
Credit Suisse Group ADR
Georg Fischer AG
Nestlé SA
Novartis AG
Novartis AG ADR
Oriflame Holding AG
Pargesa Holdings SA
Roche Holding AG
Swiss Life Holding
Swiss Re Ltd.
Syngenta AG Registered
UBS Group AG
Zurich Financial Services AG
Total for Switzerland
136,823
1,124
1,600
796
3,232
8,768
29,728
30,894
300
34,817
22,747
17,977
1,900
1,785
6,269
2,771
6,854
6,707
39,115
10,248
3,502
294
136
244
247
228
950
984
162
3,034
2,437
1,927
67
163
1,985
688
607
3,044
1,042
3,524
25,265
3,575
277
243
247
246
224
1,020
1,064
257
3,137
2,798
2,205
38
150
2,192
792
757
3,402
1,035
3,892
27,551
1,085,000
133,000
1,597
787
1,834
755
71,200
1,697
4,081
2,017
4,606
Taiwan (1.64%)
Advanced Semiconductor Engineering Inc.
Taiwan Semiconductor Manufacturing Company Limited
Taiwan Semiconductor Manufacturing Company Limited
ADR
Total for Taiwan
Number
of Shares
Turkey (0.67%)
Akbank TAS
Turkiye Garanti Bankasi AS
Total for Turkey
United Kingdom (16.05%)
3i Group PLC
AMEC PLC
Amlin PLC
Anglo American PLC
ARM Holdings PLC ADR
AstraZeneca PLC
Aviva PLC
BAE Systems PLC
Barclays PLC
Barratt Developments PLC
Bellway PLC
Bovis Homes Group PLC
BP PLC
BT Group PLC
Carillion PLC
Centrica PLC
Debenhams PLC
Diageo PLC
Direct Line Insurance Group PLC
easyJet PLC
FirstGroup PLC
Galliford Try PLC
GKN PLC
GlaxoSmithKline PLC
Home Retail Group PLC
HSBC Holdings PLC
ITV PLC
J Sainsbury PLC
John Wood Group PLC
Lloyds TSB Group PLC
Man Group PLC
Marks & Spencer Group PLC
Mitchells & Butlers PLC
Mitie Group PLC
Mondi PLC
National Express Group PLC
National Grid PLC
Old Mutual PLC
Pace Micro Technology PLC
Petrofac Limited
Premier Farnell PLC
Premier Oil PLC
Qinetiq Group PLC
Rexam PLC
Rio Tinto PLC ADR
Royal Dutch Shell PLC Cl. A
Royal Dutch Shell PLC Cl. B
Standard Chartered PLC
4
Average
Cost
($)
Fair
Value
($)
272,438
229,112
1,019
912
1,931
983
892
1,875
23,239
3,500
39,230
6,200
56,610
2,200
24,981
112,561
97,194
21,829
5,752
20,067
460,012
17,200
31,096
95,812
68,200
52,500
42,601
12,720
88,131
8,802
34,107
145,696
123,770
139,488
110,781
167,208
17,840
278,589
97,240
30,336
26,123
38,271
6,600
38,944
200,072
137,464
11,100
13,670
66,921
32,848
52,747
14,700
24,098
104,061
25,784
18,467
243
56
330
164
3,102
104
243
942
437
231
169
366
3,803
69
176
532
74
1,734
257
394
281
299
191
3,878
387
1,583
571
852
234
471
318
279
245
242
129
237
3,046
480
36
264
231
195
238
135
1,285
3,883
1,026
390
235
56
367
112
3,479
173
241
996
497
263
268
438
3,792
152
209
496
119
1,896
281
386
207
300
224
3,779
410
1,560
572
870
226
466
299
319
234
237
178
235
3,207
543
81
248
227
96
232
159
1,239
3,673
914
369
Number
of Shares
Average
Cost
($)
Contracts and Rate
Pay
Receive
Fair
Value
($)
Due Fair
Date Value Counterparty
Credit
Rating*
1
1.091 2,818 CAD
3,075 SGD 9/18/15 29 State Street Bank and Trust Co.
AA1
1.089 818 CAD
890 SGD 9/18/15
6 Bank of Montreal
A+
SVG Capital PLC
23,438
231
223
1
7.093 877 CAD
6,220 SEK 7/22/15 59 Royal Bank of Canada
AATate & Lyle PLC
13,090
173
133
1
7.085 1,063 CAD
7,530 SEK 7/22/15 70 Royal Bank of Canada
AATesco PLC
614,997
2,691
2,564
1
6.681 4,073 CAD
27,210 SEK 7/22/15 22 Toronto-Dominion Bank
AAThe Berkeley Group Holdings PLC
3,000
147
197
1
0.748 1,565 CAD
1,170 CHF 8/31/15
1 Royal Bank of Canada
AAThe Go-Ahead Group PLC
3,100
71
160
1
0.755 10,274 CAD
7,760 CHF 8/31/15 115 Toronto-Dominion Bank
AA1
2.184 23 CAD
50 TRY 7/21/15
— Royal Bank of Canada
AAUnilever PLC
78,689
3,776
4,215
1
2.262 22 CAD
50 TRY 7/21/15
1 State Street Bank and Trust Co.
AAVesuvius PLC
8,900
86
74
1
0.811 123 CAD
100 USD 9/11/15
AAVodafone Group PLC
327,542
1,455
1,477
1
0.810 14,479 CAD
11,730 USD 9/11/15 167 Toronto-Dominion Bank
AAWilliam Morrison Supermarkets PLC
110,043
439
390
1
0.808 10,486 CAD
8,475 USD 9/11/15 96 State Street Bank and Trust Co.
AATotal for United Kingdom
43,901
44,993
1
0.807 316 CAD
255 USD 9/11/15
2 Bank of Montreal
A+
1
0.000 692,290 COP
275 USD 7/21/15
12 Bank of Montreal
A+
United States (7.72%)
1
0.000 723,615 COP
282 USD 7/21/15
6 Bank of Montreal
A+
Carnival Corporation
34,455
1,795
2,123
1
0.000 223,275 COP
86 USD 7/21/15
AA1
0.051 6,490 CZK
332 CAD 7/14/15
3 Bank of Montreal
A+
iShares MSCI EAFE Index Fund
246,184
19,805
19,498
1
0.051 11,450 CZK
581 CAD 7/14/15
— State Street Bank and Trust Co.
AATotal for United States
21,600
21,621
1
0.187 1,070 DKK
200 CAD 7/22/15
— Toronto-Dominion Bank
AATotal for Foreign Equities (97.91%)
259,885
274,432
1
1.409 390 EUR
549 CAD 7/7/15
AATotal Investments (98.14%)
$260,500 $275,088
1
1.395 2,654 EUR
3,703 CAD 7/7/15
AACash and Other Net Assets (1.86%)
5,218
1
1.396 215 EUR
300 CAD 10/7/15
AATotal Net Assets Attributable to Holders of Redeemable Units (100.00%)
$280,306
1
0.161 14,278 HKD
2,302 CAD 9/4/15
3 Bank of Montreal
A+
1
0.016 91,070 INR
1,419 USD 9/2/15
AA1
0.016 79,610 INR
1,240 USD 9/2/15
5 Bank of Montreal
A+
1
0.000 18,186,930 IDR
1,346 USD 9/10/15
2 Bank of Montreal
A+
1
0.331 3,580 ILS
1,185 CAD 8/31/15
1 Bank of Montreal
A+
1
0.033 54,880 TWD
1,785 USD 9/3/15
AA(in $000’s)
1
0.941 84 NZD
79 CAD 7/15/15
8 Canadian Imperial Bank of Commerce A+
1
0.160 755 NOK
121 CAD 7/22/15
AA Contracts Due Fair
Credit
1
0.160 6,160 NOK
988 CAD 7/22/15
AA and Rate
Pay
Receive Date Value Counterparty
Rating*
1
0.001 1,274,957 KRW
1,149 USD 8/31/15 10 State Street Bank and Trust Co.
AA
1
0.001 1,361,490 KRW
1,223 USD 8/31/15
AAForward contracts
1
0.151 1,305 SEK
197 CAD 7/22/15
AA1
0.960 360 AUD
346 CAD 9/10/15
1 Toronto-Dominion Bank
AA1
0.151 6,860 SEK
1,037 CAD 7/22/15
AA1
0.315 3,060 BRL
965 USD 9/8/15
5 Bank of Montreal
A+
1
3.199 17 USD
55 BRL 9/8/15
— Bank of Montreal
A+
1
1.054 9,554 CAD
10,070 AUD 9/10/15 95 Toronto-Dominion Bank
AA1 64.910 1,559 USD 101,195 INR 9/2/15
AA1
19.747 446 CAD
8,800 CZK 7/14/15
AA1 13,754.000 2,292 USD 31,525,525 IDR 9/10/15 48 State Street Bank and Trust Co.
AA1
5.685 1,570 CAD
8,926 DKK 7/22/15 96 Bank of Montreal
A+
1
31.019 16 USD
500 TWD 9/3/15
— Canadian Imperial Bank of Commerce A+
1
5.464 284 CAD
1,550 DKK 7/22/15
6 Bank of Montreal
A+
1 1,118.700 26 USD
29,110 KRW 8/31/15
1
5.407 2,144 CAD
11,590 DKK 7/22/15 20 Toronto-Dominion Bank
AA
2,725
1
5.369 1,788 CAD
9,600 DKK 7/22/15
4 Bank of Montreal
A+
1
0.729 2,351 CAD
1,714 EUR 7/7/15
34 Bank of Montreal
A+
1
0.949 41 AUD
38 CAD 9/10/15
AA1
0.739 135 CAD
100 EUR 7/7/15
AA1
0.953 7,710 AUD
7,345 CAD 9/10/15 (43) State Street Bank and Trust Co.
AA1
0.740 203 CAD
150 EUR 7/7/15
AA1
0.942 1,300 AUD
AA1
0.720 139 CAD
100 EUR 7/7/15
AA1
0.947 360 AUD
341 CAD 9/10/15 (4) Bank of Montreal
A+
1
0.722 139 CAD
100 EUR 7/7/15
AA1
0.304 2,412 BRL
733 USD 9/8/15 (30) Royal Bank of Canada
AA1
0.725 37,237 CAD
27,000 EUR 7/7/15 333 Toronto-Dominion Bank
AA1
1.042 4,550 CAD
4,741 AUD 9/10/15 (7) Royal Bank of Canada
AA1
0.720 1,777 CAD
1,280 EUR 7/7/15
4 Bank of Montreal
A+
1
1.042 5,651 CAD
5,890 AUD 9/10/15 (7) Bank of Montreal
A+
1
6.300 341 CAD
2,150 HKD 9/4/15
AA1
0.715 3,712 CAD
2,654 EUR 10/7/15 (10) Royal Bank of Canada
AA1
6.281 4,526 CAD
28,430 HKD 9/4/15
AA1
6.200 615 CAD
3,810 HKD 9/4/15
(1) Toronto-Dominion Bank
AA1
3.056 972 CAD
2,970 ILS 8/31/15 11 Toronto-Dominion Bank
AA1
3.000 973 CAD
2,920 PLN 7/7/15
(3) Bank of Montreal
A+
1 98.787 4,042 CAD 399,270 JPY 8/31/15 43 State Street Bank and Trust Co.
AA1
2.155 65 CAD
140 TRY 7/21/15
AA1 99.493 375 CAD
37,348 JPY 8/31/15
AA1
0.049 6,635 CZK
327 CAD 7/14/15
AA1 99.889 271 CAD
27,075 JPY 8/31/15
AA1
0.185 5,720 DKK
AA1 100.254 26,475 CAD 2,654,195 JPY 8/31/15 681 Toronto-Dominion Bank
AA1
0.185 4,860 DKK
898 CAD 7/22/15 (9) State Street Bank and Trust Co.
AA1 99.740 3,678 CAD 366,872 JPY 8/31/15 75 Bank of Montreal
A+
1
1.367 320 EUR
437 CAD 7/7/15
A+
1 100.100 9,746 CAD 975,591 JPY 8/31/15 235 State Street Bank and Trust Co.
AA1
1.361 225 EUR
306 CAD 7/7/15
(7) State Street Bank and Trust Co.
AA1
6.311 79 CAD
500 NOK 7/22/15
AA1
1.360 95 EUR
129 CAD 7/7/15
AA1
6.343 2,354 CAD
14,930 NOK 7/22/15 15 Toronto-Dominion Bank
AA1
1.382 20,880 EUR
AA1
3.010 1,033 CAD
3,110 PLN 7/7/15
A+
1
1.378 5,270 EUR
7,263 CAD 7/7/15
AA1
3.013 1,092 CAD
3,290 PLN 7/7/15
AA1
1.384 610 EUR
844 CAD 7/7/15
A+
1
3.014 2,193 CAD
6,610 PLN 10/7/15
AA1
0.160 3,240 HKD
518 CAD 9/4/15
A+
1
0.515 23,695 CAD
12,200 GBP 8/26/15 246 Toronto-Dominion Bank
AA-
Schedule of Derivative Instruments
5
Contracts and Rate
Pay
Receive
Due Fair
Credit
Rating*
Contracts and Rate
Pay
Receive
1
0.159 33,130 HKD
AA1
0.160 7,600 HKD
1,213 CAD 9/4/15
AA1
0.000 15,127,840 IDR
1,117 USD 9/10/15 (2) Toronto-Dominion Bank
AA1
0.000 3,169,645 IDR
234 USD 9/10/15 (1) Bank of Montreal
A+
1
0.320 3,939 ILS
1,262 CAD 8/31/15 (41) Bank of Montreal
A+
1
0.327 1,040 ILS
AA1
0.326 1,010 ILS
AA1
0.010 15,320 JPY
153 CAD 8/31/15 (4) Royal Bank of Canada
AA1
0.010 30,500 JPY
AA1
0.010 6,000 JPY
60 CAD 8/31/15 (2) Toronto-Dominion Bank
AA1
0.010 31,691 JPY
AA1
0.010 3,621,386 JPY
AA1
0.032 63,860 TWD
2,067 USD 9/3/15
AA1
0.155 421 NOK
AA1
0.158 3,905 NOK
A+
1
0.158 18,030 NOK
AA1
0.331 1,460 PLN
483 CAD 7/7/15
AA1
0.330 1,250 PLN
413 CAD 7/7/15
AA1
0.332 6,610 PLN
2,196 CAD 7/7/15
AA1
1.926 215 GBP
AA1
1.951 160 GBP
AA1
1.944 990 GBP
A+
1
1.943 7,470 GBP
AA1
1.946 4,610 GBP
AA1
1.952 400 GBP
A+
1
0.917 2,365 SGD
AA1
0.919 315 SGD
289 CAD 9/18/15 (2) Toronto-Dominion Bank
AA1
0.921 2,830 SGD
A+
1
0.918 5,190 SGD
AA1
0.146 1,000 SEK
AA1
0.150 12,310 SEK
AA1
0.149 11,890 SEK
AA1
0.150 795 SEK
119 CAD 7/22/15
A+
1
1.315 3,888 CHF
5,112 CAD 8/31/15 (94) Royal Bank of Canada
AA1
1.325 60 CHF
80 CAD 8/31/15
A+
1
1.333 3,510 CHF
A+
1
1.321 4,900 CHF
AA1
1.326 2,450 CHF
AA1
1.339 190 CHF
254 CAD 8/31/15
A+
1
0.444 1,884 TRY
AA1
0.460 2,350 TRY
1,081 CAD 7/21/15
A+
1
1.243 857 USD
1,066 CAD 9/11/15
A+
1
1.234 60 USD
74 CAD 9/11/15
AA1
1.230 65 USD
80 CAD 9/11/15
(1) Royal Bank of Canada
AA1
1.235 17,785 USD
AA1 64.242 3,417 USD 219,540 INR 9/2/15 (13) Bank of Montreal
A+
1 64.240 1,194 USD
76,700 INR 9/2/15
A+
1 13,468.000 3,173 USD 42,737,690 IDR 9/10/15 (18) Canadian Imperial Bank of Commerce A+
1 13,521.000 2,386 USD 32,254,370 IDR 9/10/15 (2) State Street Bank and Trust Co.
AA1 30.833 198 USD
6,100 TWD 9/3/15
AA1 1,114.600 27 USD 30,000 KRW 8/31/15
A+
1 1,112.750 27 USD 30,000 KRW 8/31/15
AA1 1,108.500 36 USD 40,000 KRW 8/31/15
AA1 1,107.100 18 USD 20,000 KRW 8/31/15
AA1 1,105.620 18 USD 20,000 KRW 8/31/15
(2,401)
Total forward contracts
324
Credit
Rating*
Spot contracts
1
0.322 9 BRL
3 USD 7/1/15
1
0.129 155 HKD
20 USD 7/2/15
Total spot contracts Total forward and spot contracts — State Street Bank and Trust Co.
—
324
AAAA-
Futures Contracts
Unrealized
Counter
Credit
Notional Gain (Loss)
party
Rating*
Description
Amount
CAD $
Goldman Sachs USD
A
MSCI EAFE E-Mini Index Futures
Net unrealized gain (loss) futures contracts Total for Schedule of Derivative Instruments
* Source: Standard & Poor’s Credit Rating Agency
Due Fair
6
1,601 (43)
$(43) $281
Financial Statements
Statement of Financial Position
(unaudited)
Statement of Comprehensive Income
(unaudited)
(in $000’s except for units outstanding and per unit amounts)
(in $000’s except for per unit amounts)
June 30,
2015
Assets
Current assets
Investments
Cash
Dividends receivable
Unrealized gain on derivatives
Net margin due from broker on
future contracts
Receivable for investment
transactions
Subscriptions receivable
$
Liabilities
Current liabilities
Payable for investment transactions
Redemptions payable
Unrealized loss on derivatives
Net assets attributable to holders
of redeemable units
Net assets attributable to holders
of redeemable units per Series
Series A
Series I
Series T
141
75
435
3
283,014
4
—
122,295
$
$
$
$
280,306 $
74,920 $
205,246 $
140 $
7,206,859
19,306,462
13,041
$
$
$
Income
Net gain (loss) on investments
Dividends
Interest for distribution purposes
Net realized gain (loss) on sale of investments
Change in unrealized appreciation (depreciation)
of investments
Net gain (loss) on investments
$
Net gain (loss) on derivatives
Net realized gain (loss) on derivative instruments
Change in unrealized (appreciation) depreciation
of derivative instruments
Net gain (loss) on derivatives
Other income
Foreign exchange gain (loss) on cash
Early redemption fee
Securities lending (see Supplementary Schedules)
Other
Total other income
Total income (loss)
—
102
892
994
121,301
Expenses
Management fees (Note 4)
Administration fees
Withholding tax on foreign income
Transaction costs
Total expenses
72,029
49,137
135
7,612,527
5,152,242
13,531
10.40 $
10.63 $
10.70 $
June 30,
2015
Six months ended
117,792
2,945
330
1,149
871
8
1,829
2,708
Number of redeemable units outstanding
(see Supplementary Schedules)
Series A
Series I
Series T
Net assets attributable to holders of
redeemable units per unit, per Series
Series A
Series I
Series T
275,088 $
4,413
824
2,110
December 31,
2014
9.46
9.54
9.96
3,045 $
2
2,148
June 30,
2014
1,780
2
3,245
8,113
13,308
1,191
6,218
(307)
691
24
(283)
(261)
430
272
—
26
1
299
13,324
1
1
32
—
34
6,682
746
85
314
207
1,352
816
91
160
17
1,084
Increase (decrease) in net assets attributable
to holders of redeemable units
$
11,972 $
5,598
Increase (decrease) in net assets attributable to
holders of redeemable units per Series
Series A
Series I
Series T
$
$
$
7,891 $
4,067 $
14 $
5,588
—
10
holders of redeemable units per unit, per Series
Series A
Series I
Series T
$
$
$
1.07 $
0.69 $
1.10 $
0.65
—
0.71
7
Statement of Changes in Net Assets
Attributable to H
oldersof Redeemable
Units (“Net assets”) (unaudited) Six months ended
(in $000’s)
Add (deduct) changes during the period:
Operations
holders of redeemable units
Six months ended
SERIES A
Net assets – beginning of period
June 30, 2015
$
Operations
Redeemable unit transactions
Proceeds from issue of redeemable units
Cash paid for redemption of redeemable units
Units issued on reinvestment of distributions
Distributions
From net investment income
Net assets – end of period
SERIES I
$
$
Operations
Distributions
$
72,029 $
SERIES T
June 30, 2014
5,588
2,758
(7,748)
680
(4,310)
3,977
(11,361)
482
(6,902)
(690)
(487)
74,920 $
Distributions
Return of capital
10
(5)
(5)
—
—
(1)
(3)
(4)
(1)
(4)
(5)
147
TOTAL FUND
$
121,301 $
82,849
4,067
—
Distributions
Return of capital
157,632
(5,590)
789
152,831
—
—
—
—
(789)
—
205,246 $
—
8
14
140 $
142
$
—
135 $
June 30, 2014
Operations
80,906
49,137 $
$
82,707
7,891
June 30, 2015
$
11,972
5,598
160,390
(13,343)
1,469
148,516
3,977
(11,361)
482
(6,902)
(1,480)
(3)
(1,483)
(488)
(4)
(492)
280,306 $
81,053
Statement of Cash Flows (unaudited)
(in $000’s)
Six months ended
June 30, 2015
June 30, 2014
Cash flows from (used in) operating activities
I ncrease (decrease) in net assets attributable
to holdersof redeemable units
$
Adjustments for:
Proceeds from sale of investments
Purchase of investments
Unrealized foreign exchange (gain) loss on cash
Net realized (gain) loss on sale of investments
of investments
of derivative instruments
11,972 $
5,598
15,984
(162,579)
(32)
(2,148)
19,027
(13,154)
27
(3,245)
(8,113)
(1,191)
(24)
261
(560)
(184)
(145,500)
7,139
Distributions to holders of redeemable units,
net of reinvesteddistribution
160,387
3,900
(14)
(13,437)
(10)
(11,300)
Net cash from (used in) financing activities
146,936
(7,410)
32
(27)
Net increase (decrease) in cash during the period
1,468
(298)
Cash, beginning of period
2,945
2,540
4,413 $
2,242
2
2,237
2
1,461
Net change in non-cash working capital
Net cash from (used in) operating activities
Cash flows from (used in) financing activities
Unrealized foreign exchange gain (loss) on cash
Cash, end of period
Interest received
Dividends received, net of withholding taxes
$
9
Financial Statements – Supplementary Schedules (unaudited)
Redeemable Unit Transactions
June 30, 2015 June 30, 2014
For the periods ended June 30
2015
Gross amount generated from the securities
lending transactions
Amounts paid to State Street Bank and Trust Co
Net securities lending income as reported in the
Statement of Comprehensive Income
2014
SERIES A
Outstanding, beginning of period
Issued
Redeemed
Outstanding, end of period
7,612,527
325,862
(731,530)
7,206,859
8,906,445
462,807
(1,169,267)
8,199,985
SERIES I
Issued
Redeemed
5,152,242
14,672,304
(518,084)
19,306,462
—
—
—
—
SERIES T
Issued
Redeemed
13,531
—
(490)
13,041
13,828
—
—
13,828
$
$
33 $
(7) $
39
(7)
$
26 $
32
Fees
As at June 30
2015
2014
Maximum annualized management fee
Series A
Series I
Series T
1.60%
—
1.60%
1.80%
—
1.80%
Annual fixed administration fee rate
Series A
Series I
Series T
0.20%
—
0.20%
0.20%
—
0.20%
Amounts Subject to Master Netting
Arrangements
Soft Dollar Commissions
The term “soft dollar” is used to describe a widely accepted business practice by
which the investment advisors receive various benefits from the broker through the
course of a normal business relationship. Such benefits may be in the form of
research or other materials that aid in the investment process, thus contributing to
the long-term realization of returns for the unitholders.
(in $000’s)
In the normal course of business, the Fund enters into various enforceable master
netting arrangements with its derivative counterparties. The following tables present the Fund’s financial assets and liabilities subject to
enforceable master netting arrangements. The tables are presented by financial
instrument type.
The soft dollar portion of the commissions paid to dealers for executing portfolio
transactions is not ascertainable for the first six months of 2015 and 2014.
Financial assets
Securities on Loan
Gross
asset
(in $000’s)
June 30,
2015
Fair value of securities loaned
Fair value of collateral (non-cash)
$
$
December 31,
2014
3,707 $
4,023 $
1,262
1,315
Financial
Net
instruments
amounts eligible for
presented
offset
Net
Jun. 30, 2015
Derivative assets
$2,725
$615
$2,110
$242
$1,868
Dec. 31, 2014
Derivative assets
$1,460
$311
$1,149
$607
$542
Financial liabilities
State Street Bank and Trust Co is entitled to receive payments out of the gross
amount generated from the securities lending transactions of the Fund and bears all
operational costs directly related to securities lending as well as the cost of
borrower default indemnification. Gross
liability
The table below sets out a reconciliation of the gross amount generated from the
securities lending transactions of the Fund to the revenue from securities lending
disclosed under securities lending income in the Fund’s statements of comprehensive income as at June 30, 2015 and June 30, 2014.
Gross
liabilities
offset
10
Gross
assets
offset
Financial
Net
instruments
amounts eligible for
presented
offset
Net
Jun. 30, 2015
Derivative liabilities
$2,444
$615
$1,829
$242
$1,587
Dec. 31, 2014
Derivative liabilities
$1,203
$311
$892
$607
$285
Financial Statements – Supplementary Schedules (unaudited)
Tax Loss Carry Forwards
As at June 30 (in $000’s)
2015
Net capital loss carried forward
Non-capital losses expiring:
2015
2016
in 2017 and thereafter
Total
$
42,794
$
—
—
—
—
$
The Fund qualifies as a mutual fund trust under the provisions of the Income Tax Act
(Canada) and, accordingly, is subject to tax on its income for the year, including net
realized capital gains which is not paid or payable to its unitholders as at the end of
the year. It is the intention of management that all annual net investment income
and sufficient net realized taxable capital gains will be distributed to unitholders
annually by December 31, such that there are no Canadian income taxes payable by
the Fund. As a result, the Fund does not record income taxes.
Since the Fund does not record income taxes, no benefit has been recorded by the
Fund in its financial statements in respect of its unused losses as at June 30, 2015.
The Fund has accumulated net realized capital losses of $42,794 available for
utilization against net realized capital gains. Capital losses have no expiry.
Non-capital losses realized in 2005 can be carried forward for up to ten years.
Non-capital losses realized in 2006 and after can be carried forward for up to twenty
years.
11
Financial Instruments Risks (unaudited)
(in $000’s)
Financial Instruments
MD International Value Fund (the “Fund”) invests in a diversified portfolio of global
equity securities as well as forward and futures contracts as shown in the Statement
of Investment Portfolio. The Fund invests excess cash, if any, in high grade
short-term notes with maturities of less than 1 year. These investments expose the
Fund to risks associated with financial instruments. The Fund’s exposure and
sensitivity to these risks are presented below. A description of the risks and how
the Fund manages these risks is discussed in Note 7 of the Notes to the
Financial Statements.
Currency
Swedish Krona
Swiss Franc
Total
December 31, 2014
U.S. Dollar
European Euro
The Fund’s credit risk is concentrated in investments in short-term investments,
Australian Dollar
debt and derivative instruments. The Fund’s maximum exposure to credit risk from
Brazilian Real
short-term investments and debt instruments is the carrying value on the Schedule
British Pound
Colombian Peso
of Investments and from cash as shown on the Statement of Financial Position. The
Czech Koruna
Fund’s maximum exposure to credit risk from derivative instruments is the
Danish Krone
unrealized gain as presented in the Schedule of Derivative Instruments. All foreign
Hong Kong Dollar
contracts are with counterparties with credit ratings of A+ to AA-.
Indian Rupee
As at June 30, 2015 and December 31, 2014, the Fund does not have investments in
Indonesian Rupiah
debt instruments and therefore, does not have exposure to credit risk.
Israeli Shekel
Japanese Yen
Malaysian Ringgit
New Taiwan Dollar
New
Turkish Lira
Exposures to foreign currencies as at June 30, 2015 and December 31, 2014 are
New Zealand Dollar
presented in the table below. Short-term investments, which are monetary in nature,
Norwegian Krone
are included in the Investments at Fair Value column.
Singapore Dollar
South Korean Won
Cash and
Swedish Krona
Other Net
Percentage
Swiss Franc
Assets
of Net Assets
Total
Attributable
Attributable
Credit Risk
Currency Risk
Currency
June 30, 2015
U.S. Dollar
European Euro
Australian Dollar
Brazilian Real
British Pound
Colombian Peso
Czech Koruna
Danish Krone
Hong Kong Dollar
Indian Rupee
Indonesian Rupiah
Israeli Shekel
Japanese Yen
New Taiwan Dollar
New Turkish Lira
New Zealand Dollar
Norwegian Krone
Polish Zloty
Singapore Dollar
South Korean Won
to Holders of Investments
to Holders of
Redeemable
at
Derivative Net Currency Redeemable
Units
Fair Value
Exposure
Exposure
Units
2,502
(84)
237
3
72
—
—
24
165
—
—
8
262
19
—
4
36
—
4
—
49,604
66,866
6,131
1,510
39,906
—
852
546
11,118
1,823
625
701
44,159
2,589
1,875
390
5,561
—
7,143
2,778
1,619
3,402
10,474
(2,126)
(3,228)
(785)
(801)
3,736
(3,867)
4,393
6,464
(2,183)
7,729
(4,539)
(1,850)
(71)
(2,196)
2,194
(6,236)
(2,758)
53,725
70,184
16,842
(613)
36,750
(785)
51
4,306
7,416
6,216
7,089
(1,474)
52,150
(1,931)
25
323
3,401
2,194
911
20
31
84
3,367
6,666
24,244
275,087
1,023
(8,124)
2,270
7,720
16,204
280,724
2.75%
5.78%
100.16%
2,498
57
40
—
153
—
—
2
24
—
—
4
56
—
—
—
1
10
33
—
—
99
2,977
20,253
30,050
3,418
481
17,237
—
348
254
5,470
768
303
342
17,919
—
866
1,050
246
2,492
3,184
1,384
1,650
10,077
117,792
(2,678)
(669)
3,208
(780)
1,753
(362)
(356)
1,448
(2,367)
852
1,503
(1,092)
3,226
1,448
(1,720)
753
(80)
(1,335)
(1,419)
(1,374)
1,773
(830)
902
20,073
29,438
6,666
(299)
19,143
(362)
(8)
1,704
3,127
1,620
1,806
(746)
21,201
1,448
(854)
1,803
167
1,167
1,798
10
3,423
9,346
121,671
16.55%
24.27%
5.50%
-0.25%
15.78%
-0.30%
-0.01%
1.40%
2.58%
1.34%
1.49%
-0.61%
17.48%
1.19%
-0.70%
1.49%
0.14%
0.96%
1.48%
0.01%
2.82%
7.70%
100.31%
As at June 30, 2015, if the Canadian Dollar had strengthened against all other
currencies by 10%, the Net Assets Attributable to Holders of Redeemable Units of
the Fund could have decreased by approximately $28,073, or 10.02% of Net Assets
Attributable to Holders of Redeemable Units (December 31, 2014 – 12,169, or
10.03%). Conversely, had the Canadian Dollar weakened against all other currencies
by 10%, the Net Assets Attributable to Holders of Redeemable Units of the Fund
could have increased by approximately $28,073, or 10.02% of Net Assets
Attributable to Holders of Redeemable Units (December 31, 2014 – 12,169, or
10.03%). These sensitivities are estimates. Actual results may vary and the variance
may be material.
19.17%
25.04%
6.01%
-0.22%
13.11%
-0.28%
0.02%
1.54%
2.65%
2.22%
2.53%
-0.53%
18.60%
-0.69%
0.01%
0.12%
1.21%
0.78%
0.33%
0.01%
Interest Rate Risk
As at June 30, 2015 and December 31, 2014, the Fund does not have any investments in debt instrument or interest bearing assets. Therefore, the Fund is not
exposed to interest rate risk.
Liquidity Risk
The Fund’s financial liabilities are all due within one year. Redeemable units are
redeemable on demand at the holder’s option; however, the Fund does not expect
the contractual maturity will be representative of the actual cash outflows, as
holders of these instruments typically retain them for a longer period.
Cash and
Other Net
Percentage
Assets
of Net Assets
Attributable
Attributable
to Holders of Investments
to Holders of
Redeemable
at
Derivative Net Currency Redeemable
Units
Fair Value
Exposure
Exposure
Units
12
Financial Instruments Risks (unaudited)
(in $000’s)
Other Price Risk
Fair Value Hierarchy
As at June 30, 2015, 98.1% (December 31, 2014 – 97.1%) of the Fund’s Net Assets
The following is a summary of the Fund’s use of quoted market prices (Level 1),
Attributable to Holders of Redeemable Units were invested in equity financial
internal models using observable market information as inputs (Level 2), and
instruments traded in active markets. If prices of securities traded on these markets
internal models without observable market information (Level 3) in the valuation of
decrease by 10%, with all other factors remaining constant, Net Assets Attributable
the Fund’s securities. The inputs or methodologies used for valuing securities are
to Holders of Redeemable Units could fall by approximately $27,509 (December 31,
not necessarily an indication of the risk associated with investing in those securities.
2014 – $11,779). Conversely, if prices increase by 10%, Net Assets Attributable to
Quoted prices in Significant
Holders of Redeemable Units could rise by approximately $27,509 (December 31,
active markets
other
2014 – $11,779). These sensitivities are estimates. Actual results may vary and the
for identical
observable
variance may be significant.
assets
inputs
(Level 1)
(Level 2)
Total*
Concentration Risk
June 30, 2015
Domestic Equities
Foreign Equities
Total
Concentration risk arises as a result of the concentration of exposures within the
same category. The following table summarizes the Fund’s concentration risk as a
percentage of long-term investments:
Market Segment
Domestic Equities
Telecommunication Services
Foreign Equities
Australia
Austria
Belgium
Bermuda
Brazil
Cayman Islands
China
Colombia
Czech Republic
Denmark
Finland
France
Germany
Hong Kong
India
Indonesia
Ireland
Israel
Italy
Japan
Jersey
Luxembourg
Netherlands
New Zealand
Norway
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Turkey
United Kingdom
United States
Total
June 30, 2015
December 31, 2014
0.24%
0.27%
2.54%
1.69%
0.36%
1.60%
0.81%
0.56%
2.09%
0.29%
0.31%
0.20%
0.24%
6.27%
6.51%
1.10%
1.31%
0.23%
1.41%
1.37%
1.53%
16.05%
1.20%
0.30%
2.51%
0.14%
2.11%
2.60%
1.01%
4.43%
2.41%
10.01%
1.67%
0.68%
16.36%
7.86%
100.00%
3.27%
1.77%
0.49%
1.95%
0.73%
0.15%
2.56%
0.33%
0.30%
0.22%
0.25%
6.98%
5.77%
1.23%
1.58%
0.26%
1.14%
1.50%
1.51%
15.21%
1.08%
0.35%
3.35%
0.21%
2.18%
2.70%
1.16%
4.56%
1.37%
9.92%
1.51%
0.89%
16.75%
6.50%
100.00%
December 31, 2014
Domestic Equities
Foreign Equities
Total
$
$
$
$
656 $
274,432
—
(43)
275,045 $
— $
—
2,110
(1,786)
324 $
656
274,432
2,110
(1,829)
275,369
314 $
19,941
55
—
20,310 $
— $
97,537
1,094
(892)
97,739 $
314
117,478
1,149
(892)
118,049
*The Fund does not hold any Level 3 investments.
For the period from January 1, 2015 to June 30, 2015, equity investments of
approximately $95,756 were transferred from Level 2 to Level 1. For the period from
January 1, 2014 to December 31, 2014, equity investments of approximately $61,409
were transferred from Level 1 to Level 2.
13
Notes to Financial Statements
For the periods ended June 30, 2015 and 2014
1. Name and formation of the Funds
ESTABLISHMENT OF THE FUNDS
The MD Family of Mutual Funds (individually a “Fund” and collectively the “Funds”) are unincorporated mutual fund trusts formed under the laws of the Province of Ontario
pursuant to the Declarations of Trust, and the creation dates areas follows:
Series A Units
Series I Units
MD Balanced Fund
September 9, 1992
MD Bond Fund
April 6, 1988
October 30, 2009
MD Short-Term Bond Fund
September 19, 1995
October 30, 2009
Series T Units
Private Trust Series
October 25, 2010
MD Dividend Income Fund
September 9, 1992
October 30, 2009
October 25, 2010
MD Equity Fund
March 1, 1966
October 30, 2009
October 25, 2010
MD Dividend Growth Fund
January 4, 2007
October 30, 2009
October 25, 2010
MD International Growth Fund
August 9, 2000
October 30, 2009
October 25, 2010
January 5, 2004
October 30, 2009
October 25, 2010
MD Money Fund
July 12,1983
MD Select Fund
October 29, 1993
October 30, 2009
October 25, 2010
MD American Growth Fund
September 9, 1992
October 30, 2009
October 25, 2010
October 25, 2010
MD American Value Fund
August 9, 2000
October 30, 2009
MD Strategic Yield Fund
January 30, 2014
January 30, 2014
MD Strategic Opportunities Fund
January 30, 2014
January 30, 2014
MD Precision Conservative Portfolio
January 5, 2010
MD Precision Balanced Income Portfolio
May 10, 2012
MD Precision Moderate Balanced Portfolio
January 5, 2010
MD Precision Moderate Growth Portfolio
May 10, 2012
MD Precision Balanced Growth Portfolio
January 5, 2010
MD Precision Maximum Growth Portfolio
January 5, 2010
MDPIM Canadian Equity Pool
June 16, 1999
October 25, 2010
August 9, 2000
MDPIM US Equity Pool
August 6, 1999
October 25, 2010
August 9, 2000
MD Growth Investments Limited is a mutual fund corporation incorporated under the laws of Ontario pursuant to the Letters Patent and the Series creation dates are
as follows:
MD Growth Investments Limited
Series A
Series I
July 18, 1969
October 30, 2009
MD Financial Management Inc. (“the Manager”) is the Manager of the Funds. Prior to June 2, 2010, MD Private Trust was the Manager and Trustee for the MDPIM Canadian
Equity Pool and the MDPIM US Equity Pool.
The address of the Funds’ registered office is 1870 Alta Vista Drive, Ottawa, Ontario, Canada, K1G 6R7.
Throughout these Notes to the Financial Statements, the shares of MD Growth Investments Limited have been referred to as “units” to simplify the presentation.
These financial statements were authorized for issue by the Manager on August 7, 2015.
1
FINANCIAL INSTRUMENTS
The Funds recognize financial instruments at fair value upon initial recognition.
The Funds’ investments in debt, short-term investments, equity securities and
derivatives are classified as financial assets or financial liabilities at fair value
through profit or loss (FVTPL). This category has two sub-categories: financial
assets and financial liabilities held for trading and those designated at FVTPL at
inception. A financial asset or financial liability is classified as held for trading if it
is acquired or incurred principally for the purpose of selling or repurchasing in the
near term or if on initial recognition is part of a portfolio of identifiable financial
investments that are managed together and for which there is evidence of a recent
actual pattern of short-term profit taking. The Funds’ derivatives are also
categorized as held for trading. The Funds do not classify any derivatives as hedges
in a hedging relationship. Financial assets and financial liabilities designated at
FVTPL at inception are financial instruments that are not classified as held for
trading but are managed, and their performance is evaluated on a fair value basis
in accordance with the Funds’ investment strategy. All of the Funds’ investments
in debt, short-term investments and equity securities have been designated as
FVTPL at inception and are presented on the Statement of Financial Position as
Investments. Cash is measured at fair value upon recognition and subsequently
at amortized cost.
SERIES OF UNITS
The MDPIM Canadian Equity Pool and MDPIM US Equity Pool Funds offer “Private
Trust Series” and “Series T” units which may be purchased by either MD Private
Investment Counsel (an operating division of MD Physician Services Inc.) or
MD Private Trust Company clients who have appointed MD Private Investment
Counsel to provide discretionary portfolio management services and advice to them
or MD Private Trust Company to provide trust services. “Series A” units are closed to
new subscribers. Investors holding “Series A” units of these Funds are allowed to
hold their units, as well as subscribe for additional “Series A” units of the Funds.
Each of the MD Funds other than MDPIM Canadian Equity Pool and MDPIM US Equity
Pool offer “Series A” units which are available to all MD Management Ltd. clients who
are qualified eligible investors.
“Series I” units were established to support the MD Precision Conservative Portfolio,
the MD Precision Moderate Balanced Portfolio, the MD Precision Balanced Growth
Portfolio, the MD Precision Maximum Growth Portfolio, the MD Precision Balanced
Income Portfolio and the MD Precision Moderate Growth Portfolio. These units are
only available to the six Funds listed above, and are not charged management fees.
“Series T” units were established in order to support a new tax-efficient investment
solution for clients. The series T units generate steady tax-efficient cash flow that
does not increase taxable income or impact certain benefits such as Old Age Security.
Regular way purchases and sales of financial assets are recognized at their trade
date. Transaction costs related to investments and derivatives are expensed as
incurred in the Statement of Comprehensive Income.
2. Basis of presentation and adoption
of IFRS
Subsequent to initial recognition, all financial assets and liabilities at FVTPL are
measured at fair value. Gains and losses arising from changes in the fair value are
presented in the Statement of Comprehensive Income within “Change in unrealized
appreciation (depreciation) of investments” for financial assets and liabilities
designated at FVTPL and within “Change in unrealized appreciation (depreciation)
of derivatives” for derivatives in the periods in which they arise.
These financial statements have been prepared in compliance with International
Financial Reporting Standards (IFRS) as published by the International Accounting
Standards Board (IASB).
The interest for distribution purposes shown on the Statement of Comprehensive
Income represents the coupon interest received by the Funds accounted for on an
accrual basis. Dividend income and distributions to unitholders are recorded on the
ex-dividend date. Distributions from underlying funds out of interest, foreign income
and related withholding taxes, Canadian dividends and net realized capital gains are
recognized when declared. Realized gains or losses from investment transactions
and the unrealized appreciation or depreciation of investments are computed on
an average cost basis, which exclude brokerage commissions and other trading
expenses. Brokerage commissions and other trading expenses are charged to
income as incurred.
3. Significant accounting policies
CASH
Cash is comprised of cash on and demand deposits with financial institutions.
They are recorded at cost which represents fair value.
FUNCTIONAL AND PRESENTATION CURRENCY
The financial statements are presented in Canadian dollars, which is the Funds’
functional currency. Cash, investments and other assets and liabilities denominated
in foreign currencies are translated into Canadian Dollars at the rate of exchange
prevailing on each valuation date. Transactions during the year in currencies other
than Canadian Dollars are translated into Canadian Dollars at the rate of exchange
prevailing on the trade date of the transaction. The difference in the foreign
exchange rate between trade date and settlement date of a transaction is
recognized in income on the Statement of Comprehensive Income. Foreign
exchange gains and losses relating to cash are presented as “Gain (Loss) on
foreign exchange” and those relating to other financial assets and liabilities are
presented within net gains or losses on sale of investments or derivatives.
Other financial assets and liabilities, such as accrued interest and dividends
receivable, accounts receivable for investment transactions, subscriptions
receivable, amounts receivable for securities lending transactions, distributions
payable, accounts payable for investment transactions and redemptions payable are
recognized initially at fair value, net of transaction costs, and subsequently stated at
amortized cost using the effective interest rate method. Under this method,
financial assets and liabilities reflect the amount required to be received or paid,
discounted, when appropriate, at the contracts effective interest rate.
All financial information is presented in Canadian dollars and has been rounded to
the nearest thousand, unless otherwise stated.
The Funds’ accounting policies for measuring the fair value of their investments and
derivatives are identical to those used in measuring the net asset value (NAV) for
transactions with unitholders.
The Funds’ obligation for net assets attributable to holders of redeemable units is
presented at the redemption amount.
2
FUTURES CONTRACTS
Futures contracts are valued on each valuation day using the closing market price
posted on the related public exchange. All gains or losses arising from futures
contracts are recorded as part of “Change in unrealized appreciation (depreciation)
of derivatives” in the Statement of Comprehensive Income until the contracts are
closed out or expire, at which time the gains or losses are realized and reported as
“Net realized gain (loss) on derivative instruments” in the Statement of
Comprehensive Income.
OFFSETTING FINANCIAL INSTRUMENTS
Financial assets and liabilities are offset and the net amount reported in the
statement of financial position where the Funds currently have a legally enforceable
right to set-off the recognized amounts and there is an intention to settle on a net
basis or realize the asset and settle the liability simultaneously. In the normal
course of business, the Funds may enter into various master netting agreements or
similar agreements that do not meet the criteria for offsetting in the statement of
financial position but still allow for the related amounts to be set off in certain
circumstances, such as bankruptcy or termination of the contracts.
CAPITAL RISK MANAGEMENT
Units issued and outstanding are considered to be the capital of the Funds.
The Funds do not have any specific capital requirements on the subscription and
redemption of units, other than certain minimum subscription. The Funds’ units are
offered for sale on any business day and may be redeemed or issued at the Net
Asset Value (NAV) per unit for the respective series on that business day. A business
day refers to any day the Toronto Stock Exchange is open for business. The NAV for
each series is computed daily by calculating the value of that series’ proportionate
share of net assets and liabilities of the Fund common to all series less liabilities
attributable to that series. Expenses directly attributable to a series are charged to
that series. Assets, common liabilities, revenues and other expenses are allocated
proportionately to each series based upon the relative NAVs of each series. The NAV
per unit is determined by dividing the NAV of each series of a Fund by the total
number of units of that series outstanding.
Transactions with counterparties are governed by separate master netting
agreements. Each agreement allows for net settlement of certain open contracts
where the Fund and respective counterparty both elect to settle on a net basis. In
the absence of such an election, contracts will be settled on a gross basis. However,
each party to the master netting agreement will have the option to settle all open
contacts on a net basis in the event of default of the other party.
FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. Investments are categorized as FVTPL and are recorded at fair value. In the
case of securities traded in an active market, fair value is based on quoted market
prices at the close of trading on the reporting date as provided by independent
pricing services. The Funds use the last traded market price for both financial assets
and financial liabilities where the last traded price falls within the day’s bid-ask
spread. In circumstances where the last traded price is not within the bid-ask
spread, the Manager determines the point within the bid-ask spread that is most
representative of fair value based on the specific facts and circumstances. In the
case of investments not traded in an active market, or for those securities for which
the Manager feels the latest market prices are not reliable, fair value is estimated
based on valuation techniques established by the Manager. Valuation techniques
established by the Manager are based on observable market data except in
situations where there is no relevant or reliable market data. The value of securities
estimated using valuation techniques not based on observable market data, if any,
is disclosed in the Financial Instruments Risks section of the financial statements.
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO HOLDERS OF REDEEMABLE UNITS PER UNIT
“Increase (decrease) in net assets attributable to holders of redeemable units
per unit” in the Statement of Comprehensive Income represents the increase or
decrease in net assets attributable to holders of redeemable units attributable to
each series of units for the period, divided by the weighted average units
outstanding in that series during the period.
SECURITIES LENDING TRANSACTIONS
A Fund may lend portfolio securities to earn additional income through a securities
lending agreement with its custodian. The aggregate market value of all securities
loaned by the Fund cannot exceed 50% of the assets of the Fund. The Fund receives
collateral in the form of securities deemed acceptable under National Instrument
81-102, “Mutual Funds” (“NI81-102”) of at least 102% of the fair value of securities
on loan. Collateral held is typically government and corporate bonds.
FORWARD CURRENCY CONTRACTS
The Funds may enter into forward currency contracts for either hedging or
non-hedging purposes where such activity is consistent with their investment
objectives and as permitted by the Canadian securities regulatory authorities.
Investments in forward currency contracts are entered into with approved
counterparties and are recorded at fair value.
Income from securities lending is recorded as “Securities lending” on a monthly
basis when it is receivable. Securities lending details are listed in Securities on Loan
included in the supplementary schedules to the financial statements.
Changes in fair value of forward currency contracts are recorded in “Change in
unrealized appreciation (depreciation) of derivatives”. Upon closing of the contracts,
the accumulated gains or losses are reported in “Net realized gain (loss) on sale of
derivative instruments”. Unrealized gains or losses on forward currency contracts
are categorized as financial assets or liabilities held for trading.
REDEEMABLE UNITS
The Funds issue different series of redeemable units, which are redeemable at
the holder’s option and do not have identical rights. Such units are classified as
financial liabilities. Redeemable units can be put back to the Funds at any date for
cash equal to a proportionate share of the Funds’ net asset value attributable to the
series. The redeemable units are carried at the redemption amount that is payable
at the Statement of Financial Position date if the holder exercises the right to put
the unit back to the Funds.
The contractual amounts of open contracts are disclosed in the Schedule of
Investment Portfolio in the Schedule of Derivative Instruments.
3
INVOLVEMENT IN UNCONSOLIDATED STRUCTURED ENTITIES
A structured entity is an entity that has been designed so that voting or similar
rights are not the dominant factor in deciding who controls the entity, such as when
any voting rights relate to administrative tasks only and the relevant activities are
directed by means of contractual arrangements.
4. Expenses and other related party
transactions
Certain Funds’ investment strategy entails trading in other funds on a regular basis.
The Funds considers all of its investments in other funds (“Investee Funds”) to be
investments in unconsolidated structured entities. The Funds invest in Investee
Funds whose objectives range from conserving principal to maximizing dividend
income to long-term capital growth and whose investment strategies do not
include leverage. The Investee Funds finance their operations by issuing redeemable units which are puttable at the holder’s option and entitles the holder to a
proportionate stake in the respective in the Investee Fund’s net assets. The Funds
hold redeemable units in each of their Investee Funds and the Funds have the right
to request redemption of their investment in Investee Funds daily. The Funds’
investments in Investee Funds are subject to the terms and conditions of the
respective Investee Fund’s offering documentation. The change in fair value of each
Investee Fund is included in the Statement of Comprehensive Income in “Change in
unrealized appreciation (depreciation) of investments and derivatives”.
The Manager provides the Funds with investment management and administrative
services, including providing key management personnel to the Funds. In return, the
Manager receives a management fee based on the NAV of the Funds calculated on a
daily basis and paid weekly.
The management and administration fees are unique to each Fund and are unique to
each series of units, and are disclosed on the Schedule of Fees.
No management or administration fee, or operating expenses are charged in respect
of Series I units. These units are only available to be held by other MD Funds.
No management fee or operating expenses are charged in respect of units of the
Private Trust Series of the MDPIM Canadian Equity Pool and MDPIM US Equity Pool.
Investors in these series of units have agreed to pay a managed account fee directly
to MD Private Investment Counsel. These managed account fees are charged
directly to each unitholder to a maximum rate of 1.56% per annum plus
custodial fees.
The Manager bears all of the operating expenses of the Funds (other than certain
transaction costs, taxes and borrowing costs) in return for administration fees,
calculated as a fixed annual percentage of the Funds’ NAV.
The Funds’ maximum exposure to loss from their interest in Investee Funds is equal
to the fair value of their investments in Investee Funds. Fund specific exposure to
Investee Funds is disclosed in the “Financial Instrument Risk” section of the
financial statements. Once a Fund has disposed of its shares in an Investee Fund
the Fund ceases to be exposed to any risk from that investee fund.
INDEPENDENT REVIEW COMMITTEE
The Manager has established an Independent Review Committee (“IRC”) as
required under National Instrument 81-107, “Independent Review Committee for
Investment Funds” (“81-107”). The IRC reviews conflict of interest matters related
to the operations of the Funds. In addition, in some circumstances, in place of
obtaining unitholder approval, a Fund may be reorganized with or its assets
transferred to another mutual fund managed by the Manager or an affiliate. This
requires IRC approval, and that unitholders are sent a written notice at least 60 days
before the effective date. The approval of the IRC is also required for a change
of auditor.
Certain Funds invest in Exchange Traded Funds (“ETFs”) which are disclosed on
the schedule of investment portfolio and these Funds have determined that their
investments in such ETFs are deemed unconsolidated structured entities. These
ETFs replicate, to the extent possible, the performance of the applicable benchmark
indices, or seek to provide long-term capital growth or income, as applicable, by
investing primarily in and holding the constituent securities of the applicable
benchmark indices in substantially the same proportion as they are reflected in the
applicable benchmark indices or seek to track the investment results of applicable
benchmark indices. The ETFs finance their operations by issuing redeemable shares
which are puttable at the holder’s option and entitle the holder to a proportional
stake in the respective ETF’s net asset value. The Underlying ETFs are domiciled in
the U.S. and are listed on a recognized public stock exchange.
The IRC is composed of three persons who are independent of the Manager,
the Funds and entities related to the Manager.
SHORT-TERM TRADING/EARLY REDEMPTION FEE
Clients who redeem or switch units or shares of an MD Fund are charged an early
redemption fee equal to 2.00% of the amount redeemed or switched if the
redemption or switch occurs within sixty (60) days of the date that the units or
shares were purchased or switched. Redemption fees are recorded as income in
the period of early redemption.
Certain Funds invest in mortgage-related and other asset-backed securities
(“MBS”). These securities include mortgage pass-through securities, collateralized
mortgage obligations, commercial mortgage-backed securities, asset-backed
securities, collateralized debt obligations and other securities that directly or
indirectly represent a participation in, or are secured by and payable from, mortgage
loans on real property. The debt and equity securities issued by these securities may
include tranches with varying levels of subordination. These securities may provide
a monthly payment which consists of both interest and principal payments.
Mortgage-related securities are created from pools of residential or commercial
mortgage loans, including mortgage loans made by savings and loan institutions,
mortgage bankers, commercial banks and others. Asset-backed securities are
created from many types of assets, including auto loans, credit card receivables,
home equity loans, and student loans. The Funds’ maximum exposure to loss from
their interest in MBS is equal to the fair value of their investments in such securities
as disclosed on the schedule of investment portfolio.
The early redemption fee does not apply to redemptions or switches:
· of units of MD Money Fund;
· made in connection with any systematic and scheduled withdrawal program;
· where the amount of the redemption or switch is less than $10,000; or
· made as a result of the recommendation of your MD financial consultant related
to a financial plan.
A table has been included in the “Supplementary Schedules” section of the financial
statements which describes the types of structured entities that the Funds do not
consolidate but in which they hold an interest.
4
5. Redeemable units
7. Financial instrument risk
With the exception of MD Growth Investments Limited, the Funds’ capital is
represented by an unlimited number of authorized units without nominal or par
value. All series of units are redeemable on demand by unitholders at the redemption amount represented by respective NAV of that series. Each unit entitles the
unitholder to one vote at unitholder meetings and participates equally, with respect
to other units of the same series, in any dividends or distributions, liquidation or
other rights of that series.
The Funds use financial instruments in order to achieve their respective investment
objectives. The Funds’ investments are presented in the respective Schedule of
Investment Portfolio, which groups securities by asset type, geographic region
and/or market segment.
The use of financial instruments subjects the Funds to a variety of financial
instrument risks. The Funds’ risk management practices include setting investment
policies to limit exposures to financial instrument risks and employing experienced
and professional investment advisors to invest the Funds’ capital in securities within
the constraints of investment policies. The Manager regularly monitors the Fund
advisors’ performance and compliance with the investment policies.
The relevant movements in redeemable units for the period have been presented in
the Statement of Changes in Net Assets Attributable to Holders of Redeemable
Units. The Funds invest proceeds from subscriptions in financial instruments in
accordance with the policies and risk management practices of the Funds, while
maintaining sufficient liquidity to meet unitholder redemptions. The Funds’
investment policies are set out in the prospectus and the risk management and
liquidity management practices are disclosed in Note 7.
The significant financial instrument risks, to which the Funds are exposed, along
with the specific risk management practices related to those risks, are presented
below. Fund specific disclosures are presented in the “Financial Instruments Risks”
section of the financial statements.
MD Growth Investments Limited is an incorporated company as opposed to a
mutual fund trust and, as such, has issued share capital.
CREDIT RISK
Credit risk is the risk that a counterparty to a financial instrument will not honour
its obligation under the terms of the instrument, resulting in a loss. The Funds are
exposed to credit risk through domestic and foreign bonds, derivative contracts,
cash and short-term investments, amounts due from brokers, dividends and interest
receivable and other receivables. A Fund may engage in securities lending pursuant
to the terms of an agreement which includes restrictions as set out in the Canadian
Securities Legislation. Collateral held is in the form of highly rated fixed income
instruments. All securities under lending agreements are fully collateralized. In
addition, the Funds’ custodian has indemnified the Funds from borrower default.
6. Critical accounting estimates
and judgments
The preparation of financial statements requires management to use judgment in
applying its accounting policies and to make estimates and assumptions about the
future. The following discusses the most significant accounting judgments and
estimates that the Funds have made in preparing the financial statements:
FAIR VALUE MEASUREMENT OF SECURITIES AND DERIVATIVES
NOT QUOTED IN AN ACTIVE MARKET
The Funds may, from time to time, hold financial instruments that are not quoted in
active markets. The fair value of such securities may be determined by the Funds
using reputable pricing sources or indicative prices from market makers. Broker
quotes obtained from pricing sources may be indicative but not executable or
binding. Where no market data is available, the Fund may value positions using
internal valuation models as determined appropriate by the Manager and based on
valuation methods and techniques generally recognized as standard within the
industry. Models use observable data to the extent practicable; however, the
Manager may be required to make certain assumptions and/or estimates regarding
risks, volatility and correlations as required. Changes in assumptions and estimates
could affect the reported fair values of financial instruments. The Funds consider
observable data to be market data that is readily available, regularly distributed or
updated, reliable and verifiable and provided by independent sources that are
actively involved in the relevant market.
Credit risks arising from short-term investments and fixed income securities,
including domestic and foreign bonds and preferred shares, are generally limited to
the fair value of the investments as shown in the Schedule of Investment Portfolio.
The Funds limit exposure to individual issuers/sectors and credit quality ratings. The
credit worthiness of issuers in which the Funds invest are reviewed regularly and the
portfolios are adjusted as required to match the minimum requirement as set forth
in each Fund’s prospectus. Each individual Fund’s exposure to credit risk, if any, is
presented in the Financial Instruments Risk section of the Financial Statements.
Credit risks arising from cash are limited to the carrying value as shown on the
Statement of Financial Position, except in the case of MD Money Fund, where the
credit risk is limited to the fair value of investments as shown on the Schedule of
Investment Portfolio. The Funds manage credit risk on cash and short-term
investments by investing in high grade short-term notes with credit ratings of R-1
(low) or higher as well as limiting exposure to any single issuer.
Derivative contracts are subject to netting arrangements whereby if one party to a
derivative contract defaults, all amounts with the counterparty are terminated and
settled on a net basis. As such, the maximum credit loss on derivative contracts is
the unrealized gain shown in the Schedule of Derivative Instruments, or nil if the
contract is in a loss position. Each Fund manages credit risk on derivatives by only
entering into agreements with counterparties that have an approved credit rating as
defined in NI81-102. The total unrealized gain (loss) of the derivative contract cannot
exceed 10% of each Fund’s NAV. Credit risk on amounts due from brokers is minimal
since transactions are settled through clearinghouses where securities are only
delivered for payment when cash is received.
CLASSIFICATION AND MEASUREMENT OF INVESTMENTS
AND APPLICATION OF THE FAIR VALUE OPTION
In classifying and measuring financial instruments held by the Funds, the Manager
is required to make significant judgments about whether or not the business of the
Funds is to invest on a total return basis for the purpose of applying the fair value
option for financial assets under IAS 39, Financial Instruments – Recognition and
Measurement (IAS39). The most significant judgment made include the determination that certain investments are held-for-trading and that the fair value option can
be applied to those which are not.
5
The maximum loss due to other price risk is limited to the fair value of the equity
investments and the notional exposure on derivative contracts as presented on the
Schedule of Investment Portfolio. Each individual Fund’s exposure to other price
risk, if any, is presented in the “Financial Instruments Risks” section of the
financial statements.
Credit risk related to securities lending transactions is limited by the fact that the
value of cash or securities held as collateral by the Funds in connection with these
transactions is at least 102 percent of the fair value of the securities loaned. The
collateral and loaned securities are marked to market each business day. The aggregate dollar value of portfolio securities lent and collateral held is presented in the
Financial Statement – Supplementary Schedules.
Details of each Fund’s exposure to financial instruments risks including fair value
hierarchy classification are available in the “Financial Instruments Risks” section
of the financial statements of each Fund.
LIQUIDITY RISK
Liquidity risk is the risk that the Funds will encounter difficulty in meeting
obligations associated with financial liabilities that are settled by delivering cash or
another financial asset. All Funds’ financial liabilities come due within one year. In
addition, the Funds’ units are redeemable on demand. In accordance with NI81-102,
the Funds must provide payment for redeemed units within three business days of
receipt of a redemption order. To manage this liquidity requirement, the Funds invest
primarily in liquid securities that can readily be sold in active markets and each
Fund may borrow up to 5% of its NAV. During the period ended June 30, 2015, and
December 31, 2014 no Fund borrowed against its respective line of credit.
FINANCIAL RISKS FROM UNDERLYING MUTUAL FUNDS
Certain Funds may invest in other mutual funds. The Funds’ investments in mutual
funds are subject to the terms and conditions of the respective mutual fund’s
offering documentation and are susceptible to the risks related to the underlying
mutual funds’ financial instruments. The Funds’ maximum exposure to loss from
their interests in mutual funds is equal to the total fair value of their investment in
mutual funds. Once the Funds dispose of their shares in an underlying mutual fund,
the Funds cease to be exposed to any risk from that mutual fund. The exposure to
underlying mutual fund investments is disclosed in the “Financial Instruments
Risks” section of the financial statements of each Fund.
CURRENCY RISK
Currency risk is the risk that the values of financial assets and liabilities denominated in foreign currencies fluctuate due to changes in foreign exchange rates. To the
extent the Funds hold assets and liabilities denominated in foreign currencies, the
Funds are exposed to currency risk. The Funds may also use forward contracts at the
discretion of the Manager. Each individual Fund’s exposure to currency risk, if any, is
presented in the “Financial Instruments Risks” section of the financial statements.
8. Fair value measurement
The Funds classify fair value measurements within a hierarchy that prioritizes the
inputs to Funds’ valuation techniques used in measuring fair value. Under these
provisions, an entity is required to classify each financial instrument into one of
three fair value levels as follows:
INTEREST RATE RISK
Interest rate risk is the risk that the fair value (measured as the present value) of
cash flows associated with interest bearing financial instruments will fluctuate due
to changes in the prevailing market rates of interest. In general, as interest rates
rise, the fair value of interest bearing financial instruments will fall. Financial
instruments with a longer term to maturity will generally have a higher interest
rate risk.
Level 1 – for unadjusted quoted prices in active markets for identical assets or
liabilities;
Level 2 – for inputs, other than quoted prices included in Level 1, that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and,
Level 3 – for inputs that are based on unobservable market data.
The Funds’ interest bearing financial instruments that subject the Funds to interest
rate risk include domestic and foreign bonds, asset backed securities and
collateralized mortgage obligations. Short-term money market instruments are
also interest bearing and therefore subject to interest rate risk. However, due to the
short-term nature of the securities, the interest rate risk is generally not significant.
The classification of a financial instrument is based on the lowest level of input that
is significant to the determination of fair value.
All fair value measurements are recurring. The carrying values of cash, receivable
for investment transactions, dividends and interest receivable, subscriptions
receivable, payable for investment transactions, redemptions payable, distributions
payable and the Fund’s obligation for net assets attributable to holders of
redeemable units approximate their fair values due to their short-term nature.
Fair values of securities and derivatives are classified as Level 1 when the related
security or derivative is actively traded and a quoted price is available. If an
instrument classified as Level 1 ceases to be actively traded, it is transferred out
of Level 1. In such cases, fair value is determined using observable market data
(eg. transactions for similar securities of the same issuer) and the instruments are
reclassified into Level 2, unless the measurement of its fair value requires the use of
significant unobservable inputs, in which case it is classified as Level 3. Changes in
valuation methods may result in transfers into or out of the assets’ or liabilities’
assigned levels. The level summary based on the hierarch inputs is disclosed in the
Financial Instrument Risks section of each Fund.
Interest rate risk management practices employed by the Funds include setting
target durations based on the appropriate benchmark indices and monitoring the
Funds’ durations relative to the benchmarks. If interest rates are anticipated to rise,
the Funds’ durations can be shortened to limit potential losses. Conversely, if
interest rates are anticipated to fall, the durations can be lengthened to increase
potential gains. Each individual Fund’s exposure to interest rate risk, if any, is
presented in the “Financial Instruments Risks” section of the financial statements.
OTHER PRICE RISK
Other Price risk is the risk that the fair value of financial instruments may decline
because of changes in market prices of the financial instruments, other than
declines due to interest rate risk and currency risk. Other price risk stems from
financial instruments’ sensitivity to changes in the overall market (market risk) as
well as factors specific to the individual financial instrument. Other price risk
attributable to individual investments is managed through diversification of the
portfolio and security selection and adjustments to fair value when there is
significant volatility in international markets after markets are closed. Other price
risk attributable to the general market is systematic and cannot be diversified away.
6
9. Future Accounting Changes
EQUITIES
The Funds’ equity positions are classified as Level 1 when the security is actively
traded and a reliable price is observable. The Funds subscribes to the services of a
third-party valuation service provider to provide fair value adjustments, when a
defined threshold is met, to the prices of foreign securities due to changes in the
value of securities in North American markets following the closure of the foreign
markets. The parameters used to apply the fair value adjustments are based on
observable market data. Where applicable, the foreign securities will be considered
Level 2 priced securities. The Funds do not hold any securities classified as Level 3.
The final version of IFRS 9, Financial Instruments, was issued by the IASB in July
2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 introduces a single model for classification and measurement for financial
assets that reflects the business model in which they are managed and their cash
flow characteristics. It also includes a forward-looking expected credit loss model
that will result in more timely recognition of loan losses and is a single model
applicable to all financial instruments subject to impairment accounting. It also
includes changes in respect of own credit risk in measuring liabilities elected to be
measured at fair value, so that gains caused by the deterioration of an entity’s own
credit on such liabilities are no longer recognized in the profit or loss. IFRS 9 is
effective for annual periods beginning on or after January 1, 2018, however is
available for early adoption. The Funds are in the process of assessing the impact of
IFRS 9 and have not yet determined when they will adopt the new standard.
BONDS AND SHORT-TERM INVESTMENTS
Bonds include primarily government and corporate bonds which are valued using
models with observable inputs including interest rate curves, credit spreads and
volatilities. The inputs that are significant to valuation are generally observable
and therefore the Funds’ bonds and short-term investments have been classified
as Level 2.
10. Comparative Information
DERIVATIVE ASSETS AND LIABILITIES
Derivative assets and liabilities consist of foreign currency forward contracts which
are valued based primarily on the contract notional amount, the difference between
the contract rate and the forward market rate for the same currency. The Funds’
derivative assets and liabilities have been classified as Level 2.
Certain comparative figures have been reclassified to conform with the current
year presentation.
FAIR VALUATION OF INVESTMENTS (INCLUDING UNLISTED
SECURITIES)
If the valuation methods described above are not appropriate, the Funds will
estimate the fair value of an investment using established fair valuation procedures,
such as consideration of public information, broker quotes, valuation models,
discounts from market prices of similar securities or discounts applied due
to restrictions on the disposition of securities, and external fair value
service providers.
The extent of Funds’ use of quoted market prices (Level 1), internal models using
observable market information as inputs (Level 2), and internal models without
observable market information (Level 3) in the valuation of securities is summarized
in each Fund’s ”Financial Instruments Risks” section of the financial statements.
7

2015 interim financial statements

Transcription

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